automotive industry

There are many lessons to be learned from the current state of the economy, but one that may hold particular interest for MBA students and future business leaders is this: Timing in life is everything. This period of contraction has claimed among is victims some of the proudest names in corporate America: Bear Stearns, Merrill Lynch, and General Motors, among others.

Those that remain, or remain healthy, find themselves in an incredibly advantageous position. Fiat, for example, even received assistance from the U.S. government in its takeover of Chrysler, enabling the Italian automaker to take advantage of a ready-made American distribution network for its small-car fleet, which fits nicely in to the marketplace. As many readers of this blog have undoubtedly noted, the consolidation on Wall Street has led to a “buyer’s market” for talented financial employees, with financial titans like Goldman Sachs and J.P. Morgan poised for a future with limited competition and a virtual corner on the employment market.Essentially, the current economic climate has demonstrated the importance of long-term strategy; the firms that strategically navigate the bubble to endure will reap the benefits after the bubble bursts. For example, a recent automotive conference noted that, with the average age of a vehicle in the United States at over nine years (compared to 6.5 years in 1990 and 5.1 years in 1969), the survivors of the next 2-3 lean years will be poised for a barrage of demand when consumers begin buying cars again. What’s more, this demand will coincide with a reduction of supply, as nearly all major automakers are currently closing plants, laying off workers, and streamlining operations simply to remain viable over the next few years. Those companies that are able to stay streamlined in anticipation of the next boom may encounter unprecedented success.

The initiative to adapt from a boom-and-bust cycle to a more even-keel, sensible growth structure has been discussed frequently on the macroeconomic level since the events in the financial industry in the fall of 2008. On a microeconomic level, aspring business leaders should consider this challenge as well. How does one better motivate long-term sustainability as a business model? Particularly in a climate in which employee turnover is higher than ever, and in which financial news is round-the-clock and the need for results seems immediate, how can a firm position itself to value long-term growth and the clear-if-not-immediate benefits of such a strategy? Many challenges confront the business leaders of the new economy; as new ones emerge, let us not forget the lessons of the survivors of the “old” economy.